Boilermech Holdings Bhd expects to experience a decrease in demand for its palm oil milling products for the remaining year due to the expected weaker crude palm oil (CPO) price cycle.

Its deputy MD Chia Lik Khai (picture) said the firm, which specialises in the manufacturing of biomass boilers, will remain cautiously optimistic in mitigating the expected downturn of the palm oil industry.

“Generally, there is no bullish view so far on the palm industry, and we expect the demand for the biomass boiler to soften.

“Now, we need to focus on executing our current orders and look at growth opportunities in our water treatment segment, such as in Indonesia, those are the opportunities that we can address,” he said on the sideline of Boilermech’s AGM in Subang Jaya, Selangor, last Friday.

Chia said the firm is currently eyeing on strengthening its manufacturing presence in Indonesia as the country accounts for 40% of Boilermech’s revenue.

“We are looking at ways to establish a manufacturing plant in Indonesia. Indonesia is a big market and it currently contributes more than 40% of our revenue.

“So, it fits the purpose of having a base closer to our customers and enhances the customers’ response,” he said.

He said Boilermech is currently conducting a feasibility study for an additional manufacturing plant in Indonesia, which is expected to be finalised by the end of the year.

“We are studying the plan of having manufacturing outside of Malaysia. So far, there is no firm decision on what type of plant should we build and the location,” he said.

Chia said establishing a new manufacturing plant in another country would cost the firm about RM40 million, even if the facility was similar to its factory in Malaysia.

“The cost that could incur will depend on the location and the size of the land as land cost usually remains the prominent portion out of the total cost.

“For the warehouse and machinery, the cost would not be as high if we wanted to replicate what we have here,” he said.

According to the Boilermech’s 2018 Annual Report, its main manufacturing facility, which is located in Subang, Selangor has a maximum capacity of 80 boilers per annum.

In its first quarter ended June 30, 2018 (1Q19), Boilermech’s revenue rose 19.5% to RM54.33 million from RM45.43 million, while its net profit rose 6% to RM4.9 million from RM4.6 million.

Chia said the higher earnings were attributed to the higher boilers order which began in the 1Q19.

“In tandem with the order improvement as seen in FY18, our orders for the biomass boiler grew and the earnings from the higher deliveries activities had sustained to our performance this year,” he said.